LETTER TO SHAREHOLDERS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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June 2, 1995
Dear Shareholder:
In November and December of last year, U.S. bond markets continued to be
negatively affected by higher interest rates. Since January, however, the
market has rebounded, staging an impressive rally across nearly all fixed
income sectors. This rally was sparked, in part, by the belief of many market
participants that the Federal Reserve may be at or near the end of its
tightening cycle. Unfortunately, gains from the domestic bond market rally were
offset by sharp price declines in emerging markets as a result of the economic
crisis in Mexico.
U.S. ECONOMY
Evidence of a substantial slowing in U.S. economic activity has emerged over
the last few months as a result of restrictive Federal Reserve policy and a
slowdown in trade. In the months immediately ahead, the slowdown is expected to
continue as businesses attempt to reduce unwanted inventories by trimming
production schedules and employment.
We have reduced our domestic growth expectations to reflect these trends and
now look for little or no growth in the second and third quarters of 1995. We
do not, however, believe that the economy is headed into recession. The trade
picture seems to be stabilizing, domestic consumers seem able and willing to
spend and, if necessary, the Federal Reserve will lower short-term interest
rates, particularly if inflation fears abate further. The budget debate, which
won't be resolved until September or October, is important in this regard; and
for now we're optimistic that real progress toward deficit reduction will be
made.
UPDATE ON MEXICO
In December, the Mexican government's decision to float the peso led to a
significant devaluation in its currency versus the U.S. dollar and sparked an
economic crisis. Mexico's problems spilled over to other emerging markets as
the prices for all emerging market debt consequently fell with Mexican bond
markets. To halt the devaluation of its currency, the Mexican government
implemented an economic recovery plan designed to rein in the current account
deficit and combat inflation. While the Mexican economic recovery plan is
bitter medicine for the country's economic ills, preliminary results have been
encouraging. From March 9 to May 31, 1995, the Mexican peso gained 21% versus
the U.S. dollar and volatility declined.
INVESTMENT RESULTS
Listed below is Alliance Short-Term Multi-Market Trust's performance through
its fiscal semi-annual reporting period ended April 30, 1995. The table shows
your Fund's total returns compared with the short maturity U.S. government bond
market, represented by the unmanaged Merrill Lynch (ML) 1-3 Year Government
Bond Index, and the Lipper Short World Multi-Market Income Funds Average, which
reflects performance of 44 funds. These funds have generally similar investment
objectives to your Fund, although some funds included in the Lipper average may
have somewhat different investment policies.
Six Months Ended April 30, 1995
Total Return Ending NAV
------------ ----------
ALLIANCE SHORT-TERM MULTI-MARKET TRUST
Class A -10.52% $7.44
Class B -10.76% $7.45
Class C -10.76% $7.45
ML 1-3 Year Index 0.76%
Lipper Short World MM Income Funds Avg. -1.28%
The Fund's total returns are based on the net asset values of each class of
shares as of April 30; additional investment results appear on page 4.
1
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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As of April 30, the Fund's assets were distributed as follows:
PORTFOLIO DISTRIBUTION BY COUNTRY:
Australia - 4.2% Canada - 4.5%
Denmark - 3.8% Ireland - 4.4%
Mexico - 6.9% New Zealand - 8.5%
Spain - 3.0% United Kingdom -3.6%
U.S. - 61.3%
On the following page is a discussion with Douglas Peebles, your Fund's
portfolio manager. Mr. Peebles provides his views on the current political and
economic situation in Mexico and on the areas that he expects will provide
future investment opportunities for your Fund. We appreciate your investment in
the Fund and will look forward to updating you on its progress later in the
year.
Sincerely,
John D. Carifa
Chairman and President
2
INTERVIEW WITH PORTFOLIO MANAGER
DOUGLAS J. PEEBLES, VICE PRESIDENT
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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Q: WHAT EXACTLY HAPPENED IN MEXICO?
MR. PEEBLES: On December 20, 1994, the newly elected Zedillo government
announced a change in Mexico's monetary policy that would allow the Mexican
peso to depreciate up to 12% versus the U.S. dollar. This change in policy came
as quite a shock to both the Mexican domestic marketplace as well as the
international financial community since this Administration had repeatedly
stated that there would be no change in the exchange rate policy which had been
in place since 1987. The devaluation caused a severe loss of confidence in the
Zedillo Administration among market participants, and the peso fell drastically
lower than the planned 12% devaluation. The peso finally found a bottom on
March 9, 1995-approximately 50% weaker than it was on December 19, 1994.
Q: WAS THE DROP IN THE PESO-TO-DOLLAR EXCHANGE RATE THE ONLY WAY THE FUND WAS
AFFECTED BY THE MEXICAN CRISIS?
MR. PEEBLES: No. Yields increased substantially and since price has an inverse
relationship to yield, the prices of the Fund's Mexican securities fell. In
fact, the yield on the benchmark two-day Mexican cetes increased from 13.75% on
December 19, 1994, to a peak of 82.65% on March 22, 1995. Yields on
dollar-denominated Tesobonos also increased but to a lesser degree.
Q: WHAT IS THE CURRENT OUTLOOK FOR THE FUND'S MEXICAN EXPOSURE?
MR. PEEBLES: With the help of the Clinton Administration's economic aid
package, the short-term liquidity crisis in Mexico has been alleviated. Prudent
measures have also been adopted within Mexico to assure that previously
implemented policy initiatives will continue to keep it on a path toward a
tier-one industrialized economy. The trade balance in Mexico has already turned
into a surplus; now the investment community will look for a peak in inflation
and signs that the already-wounded banking sector will survive without causing
any further distress to the Mexican economy. If these key factors materialize,
the Mexican peso should continue to strengthen as it has done since its trough
on March 9, 1995.
Q: DO YOU SEE OPPORTUNITIES IN OTHER AREAS OF THE U.S. DOLLAR BLOC?
MR. PEEBLES: We continue to look favorably on prospects within Canada and New
Zealand. In Canada, the economy continues to grow at a healthy pace and
inflation is below the Bank of Canada's 1-3% target range. Therefore, higher
real interest rates should allow the Canadian dollar to appreciate against the
U.S. dollar. While a long-standing negative for Canada is its large budget
deficit, substantial government spending cuts were announced in the most recent
Budget Statement.
New Zealand continues to have among the best investment potential within the
international arena. Of all countries included in the Organization for Economic
Cooperation and Development (OECD), New Zealand has the largest budget surplus
as a percentage of gross domestic product. We believe this surplus, combined
with the rigorous anti-inflation mandate of the Reserve Bank of New Zealand,
should lead to currency appreciation.
Q: HOW HAS THE WEAK U.S. DOLLAR AFFECTED THE FUND'S PORTFOLIO?
MR. PEEBLES: Historically the Fund has not taken large positions across
different currency blocs, so the direct impact has not been substantial.
However, the dollar's weakness definitely slowed economic recoveries in Europe
and Japan. We have positioned the portfolio with securities issued by European
countries that have effectively tightened monetary policy, such as Spain and
Denmark. We believe their strong currencies, led by the German mark, will allow
the European Central Banks to let rates drift lower.
3
INVESTMENT RESULTS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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AVERAGE ANNUAL TOTAL RETURN AS OF APRIL 30, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year -9.46% -13.35%
. Five Years +2.75 +1.87
. Since Inception* +4.34 +3.58
SEC Yield 9.32%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year -10.02% -12.53%
. Five Years +2.03 +2.03
. Since Inception* +2.42 +2.42
SEC Yield 9.00%
CLASS C SHARES
. One Year -10.02%
. Since Inception* -3.76
SEC Yield 9.02%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (3% year 1, 2% year 2, 1% year 3, 0% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
* Inception: 5/5/89, Class A; 2/5/90, Class B; 5/3/93, Class C.
4
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- --------------------------------------------------------------------
AUSTRALIA-4.2%
GOVERNMENT OBLIGATION-4.2%
Commonwealth of Australia
12.50%, 1/15/98
(cost $43,072,190) AU$ 53,900 $ 42,450,267
CANADA-4.5%
GOVERNMENT OBLIGATIONS-4.5%
Canadian Treasury Bills
Zero coupon, 6/29/95 CA$ 29,320(a) 21,295,011
Zero coupon, 7/06/95 32,950 23,897,536
(cost $44,033,147) 45,192,547
DENMARK-3.8%
GOVERNMENT OBLIGATION-3.8%
Kingdom of Denmark
7.00%, 8/15/97
(cost $38,303,203) DKK 212,000 38,528,331
IRELAND-4.4%
GOVERNMENT OBLIGATION-4.4%
Irish Gilts
8.75%, 7/27/97
(cost $44,599,906) IEP 27,000 44,359,545
MEXICO-6.9%
GOVERNMENT OBLIGATIONS-5.5%
Mexican Treasury Bills
Zero coupon, 5/25/95 MXP 50,000(a) 8,031,276
Zero coupon, 6/01/95 100,352(a) 15,913,859
Zero coupon, 6/08/95 45,431(a) 7,113,783
Zero coupon, 10/05/95 54,348(a) 7,356,986
Zero coupon, 11/09/95 116,500(a) 15,112,502
Zero coupon, 12/07/95 20,093(a) 2,522,220
56,050,626
BANKING-1.4%
Mexican Nafinsa Pagare
Zero coupon, 5/04/95 85,295 14,251,348
Total Mexican Securities
(cost $124,154,703) 70,301,974
NEW ZEALAND-8.5%
DEBT OBLIGATION-6.5%
Republic National Bank
of New York-FRN
2.83144%, 8/04/95 NZ $100,000(a) $ 66,058,909
GOVERNMENT OBLIGATION-2.0%
Government of New Zealand
8.00%, 11/15/95 30,000(a) 20,057,630
Total New Zealand Securities
(cost $72,677,196) 86,116,539
SPAIN-3.0%
GOVERNMENT OBLIGATION-3.0%
Government of Spain
7.30%, 7/30/97
(cost $30,300,802) ESP 4,025,000 30,325,672
UNITED KINGDOM-3.6%
GOVERNMENT OBLIGATION-3.6%
United Kingdom Treasury
9.75%, 1/19/98
(cost $37,126,155) GBP 22,070 36,857,835
UNITED STATES-61.3%
GOVERNMENT OBLIGATIONS-14.5%
Mexico Tesobonos
Zero coupon, 5/04/95 US$ 51,246(a) 51,123,010
Zero coupon, 7/27/95 76,162(a) 73,404,936
Zero coupon, 11/16/95 24,135(a) 22,259,711
146,787,657
DEBT OBLIGATIONS-9.0%
SMM Trust Co., Ltd.
6.50%, 5/16/96 5,000 4,998,500
7.91%, 1/22/97 41,000 40,987,700
Wachovia Bank
4.25%, 6/29/95 45,400 45,259,260
91,245,460
5
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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PRINCIPAL
AMOUNT
(000) U.S. $VALUE
- ---------------------------------------------------------------------
AGENCY OBLIGATION-1.0%
Export/ Import Bank of Japan
10.375%, 6/27/95 US$ 10,000(a) $ 10,067,000
TIME DEPOSITS-36.8%
Bayerische Landesbank
6.125%, 5/05/95 50,000 50,000,000
Credit Suisse
6.1875%, 7/05/95 50,000 50,000,000
Republic National Bank
5.9375%, 5/01/95 113,800 113,800,000
Toronto-Dominion Bank
5.9375%, 5/01/95 110,000 110,000,000
6.1875%, 6/05/95 50,000 50,000,000
373,800,000
Total United States Securities
(cost $624,535,210) 621,900,117
TOTAL INVESTMENTS-100.2%
(cost $1,058,802,512) $1,016,032,827
OUTSTANDING PUT OPTION WRITTEN-0.0%
JPY
expiring May 1995
@ 84.55
(premiums received
$38,619) JPY 919,500 (38,619)
TOTAL INVESTMENTS NET OF
OUTSTANDING OPTION WRITTEN-100.2% 1,015,994,208
Other assets less liabilities-(0.2)% (1,514,106)
NET ASSETS-100% $1,014,480,102
(a) Securities segregated to collateralize forward exchange currency contracts
with an aggregate market value of approximately $320,316,833.
Glossary:
FRN-Floating rate note.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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ASSETS
Investments in securities, at value (cost $1,058,802,512) $1,016,032,827
Cash, at value (cost $125,260) 128,243
Receivable for investment securities sold 257,805,184
Interest receivable 12,929,282
Receivable for capital stock sold 198,123
Prepaid expenses 36,979
Total assets 1,287,130,638
LIABILITIES
Outstanding options written, at value (premiums received $38,619) 38,619
Payable for investment securities purchased 255,881,077
Dividend payable 5,511,204
Payable for capital stock redeemed 5,357,226
Unrealized depreciation of forward exchange currency contracts 4,253,070
Advisory fee payable 464,862
Distribution fee payable 123,820
Interest payable for swap contracts 32,411
Unrealized depreciation of swap contracts 12,300
Accrued expenses 975,947
Total liabilities 272,650,536
NET ASSETS $1,014,480,102
COMPOSITION OF NET ASSETS
Capital stock, at par $1,362,513
Additional paid-in capital 1,321,401,091
Distributions in excess of net investment income (11,099,195)
Accumulated net realized loss on investments, options
and foreign currency transactions (250,335,914)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (46,848,393)
$1,014,480,102
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($377,024,924/
50,650,584 shares of capital stock issued and outstanding) $7.44
Sales charge-4.25% of public offering price .33
Maximum offering price $7.77
CLASS B SHARES
Net asset value and offering price per share ($633,287,106/
85,041,165 shares of capital stock issued and outstanding) $7.45
CLASS C SHARES
Net asset value, redemption and offering price per share($4,168,072/
559,549 shares of capital stock issued and outstanding) $7.45
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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INVESTMENT INCOME
Interest(net of foreign taxes withheld of $158,439) $54,036,512
EXPENSES
Advisory fee $3,448,774
Distribution fee-Class A 703,029
Distribution fee-Class B 3,894,484
Distribution fee-Class C 32,491
Transfer agency 1,493,755
Custodian 438,933
Interest expense 351,414
Taxes 247,721
Administrative 84,323
Printing 70,157
Audit and legal 59,478
Registration 38,182
Directors' fees 9,010
Miscellaneous 21,349
Total expenses 10,893,100
Net investment income 43,143,412
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investment transactions (18,201,720)
Net realized loss on options and foreign currency transactions (146,350,135)
Net change in unrealized appreciation (depreciation) of:
Investments (49,353,002)
Options and foreign currency denominated assets and liabilities 11,001,048
Net loss on investments (202,903,809)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(159,760,397)
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $43,143,412 $144,698,728
Net realized loss on investments, options
and foreign currency transactions (164,551,855) (162,843,081)
Net change in unrealized appreciation(depreciation)
of investments, options and foreign currency
denominatied assets and liabilities (38,351,954) 23,135,437
Net increase (decrease) in net assets
from operations (159,760,397) 4,991,084
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income and other sources
Class A (21,410,975) -0-
Class B (32,564,578) -0-
Class C (267,054) -0-
Return of capital
Class A -0- (51,591,578)
Class B -0- (82,462,553)
Class C -0- (524,512)
CAPITAL STOCK TRANSACTIONS
Net decrease (376,964,293) (966,776,583)
Total decrease (590,967,297) (1,096,364,142)
NET ASSETS
Beginning of year 1,605,447,399 2,701,811,541
End of period $1,014,480,102 $1,605,447,399
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 (UNAUDITED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term Multi-Market Trust, Inc. (the 'Fund'), was incorporated in
the State of Maryland on February 17, 1989 as a non-diversified, open-end
investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.25% Class B shares are sold with a
contingent deferred sales charge which declines from 3.0% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares six years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. Distribution of Class B and Class
C shares commenced on February 5, 1990 and May 3, 1993, respectively. The
following is a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Investments are stated at value. Investments for which market quotations are
readily available are valued at the closing price on day of valuation.
Securities for which market quotations are not readily available are valued in
good faith at fair value using methods determined by the Board of Directors.
Securities which mature in 60 days or less are valued at amortized cost, which
approximates market value, unless this method does not represent fair value.
Restricted securities are valued at fair value as determined by the Board of
Directors. In determining fair value, consideration is given to cost, operating
and other financial data.
2. OPTION WRITING
When the Fund writes an option, an amount equal to the premium received by the
Fund is recorded as a liability and is subsequently adjusted to the current
market value of the option written. Premiums received from writing options
which expire unexercised are recorded by the Fund on the expiration date as
realized gains. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also recorded as a realized gain, or if the premium is less than the amount
paid for the closing purchase transaction, as a realized loss. If a call option
is exercised, the premium is added to the proceeds from the sale of the
underlying security or currency in determining whether the Fund has realized a
gain or loss. If a put option is exercised, the premium reduces the cost basis
of the security or currency purchased by the Fund. In writing an option, the
Fund bears the market risk of unfavorable changes in the price of the security
or currency underlying the option. Exercise of an option written by the Fund
could result in the Fund selling or buying a security or currency at a price
different from the current market value.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward foreign exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the
rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated at rates of exchange prevailing when
accrued.
Net foreign exchange losses of $146,350,135 represent foreign exchange gains
and losses from sales and maturities of securities, holdings of foreign
currencies, options on foreign currencies, exchange gains and losses realized
between the trade and settlement dates on security transactions, and the
difference between the amounts of interest recorded on the Fund's books and the
U.S. dollar equivalent of the amounts actually received or paid. Net currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of
unrealized depreciation of investments and foreign currency denominated assets
and liabilities.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
10
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the 'Adviser'), an advisory fee at an annual rate of
.55 of 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
The Adviser has agreed under the terms of the advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fee, and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Fund believes that the most restrictive expense ratio limitation
currently imposed by any state is 2 1/2% of the first $30 million of the Fund's
average daily net assets, 2% of the next $70 million of its average daily net
assets and 1 1/2% of its average daily net assets in excess of $100 million. No
reimbursement was required by the Adviser for the six months ended April 30,
1995. Pursuant to the advisory agreement, the Fund also paid $84,323 to the
Adviser representing the costs of certain legal and accounting services
provided to the Fund by the Adviser for the six months ended April 30, 1995.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,046,419 for the six months ended April 30, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $11,392 from the sale of Class A shares and
$1,045,428 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the six months ended April 30, 1995.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of .30 of 1% of the average daily net assets attributable to the Class A
shares and 1% of the average daily net assets attributable to both Class B and
Class C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance an promotional activities. The Distributor has incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $8,552,032, and $986,024, for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods. In accordance with
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
11
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
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NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $677,776,624 and $903,339,215, respectively, for the six months
ended April 30, 1995.
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings and to hedge certain firm purchase and sale commitments denominated in
foreign currencies. A forward exchange currency contract is a commitment to
purchase or sell a foreign currency at a future date at a negotiated forward
rate. The gain or loss arising from the difference between the original
contracts and the closing of such contracts is included in net realized gains
or losses on foreign currency transactions. Fluctuations in the value of
forward exchange currency contracts are recorded for financial reporting
purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or U.S. Government securities in a separate account of the Fund having a value
equal to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The face or contract amount, in U.S. dollars, as
reflected in the following table, reflects the total exposure the Fund has in
that particular currency contract.
At April 30, 1995, the Fund had outstanding forward exchange currency
contracts, as follows:
CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ------------ ------------ ------------
FOREIGN CURRENCY BUY CONTRACTS
Belgian Francs,
expiring 5/30/95 285,000 $ 10,188,032 $ 9,997,435 $ (190,597)
British Pounds,
expiring 8/23/95 18,230 28,682,626 29,274,511 591,885
Deutsche Marks,
expiring 5/10/95-6/20/95 107,747 74,131,107 77,814,865 3,683,758
Irish Punt,
expiring 5/22/95 13,900 22,802,595 22,682,439 (120,156)
Japanese Yen,
expiring 5/10/95-5/19/95 7,256,433 81,698,836 86,456,594 4,757,758
New Zealand Dollars,
expiring 8/04/95 59,950 39,661,980 40,030,990 369,010
Swiss Francs,
expiring 5/30/95 275,000 180,742,688 239,891,924 59,149,236
12
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
CONTRACT COST ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ------------ ------------ ------------
FOREIGN CURRENCY SALE CONTRACTS
Australian Dollars,
expiring 5/22/95-6/26/95 92,445 $ 67,238,897 $ 67,092,747 $ 146,150
Belgian Francs,
expiring 5/30/95 1,789,799 63,578,524 62,768,668 809,856
British Pounds,
expiring 8/23/95 11,313 40,704,066 40,885,420 (181,354)
Deutsche Marks,
expiring 5/10/95-6/20/95 153,009 107,951,931 110,547,472 (2,595,541)
Irish Punt,
expiring 5/22/95 13,900 22,996,782 22,684,688 312,094
Japanese Yen,
expiring 5/10/95-5/19/95 6,315,360 69,906,738 75,244,362 (5,337,624)
New Zealand Dollars,
expiring 8/04/95 59,950 37,714,545 40,014,698 (2,300,153)
Swiss Francs,
expiring 5/30/95 275,000 176,317,058 239,664,450 (63,347,392)
$(4,253,070)
The Fund enters into interest rate swaps on sovereign debt obligations to
protect itself from interest rate fluctuations on the underlying floating rate
debt instruments. A swap is an agreement that obligates two parties to exchange
a series of cash flows at specified intervals based upon or calculated by
reference to changes in specified prices or rates for a specified amount of an
underlying asset. The payment flows are usually netted against each other, with
the difference being paid by one party to the other.
Risks may arise as a result of the failure of another party to the swap
contract to comply with the terms of the swap contract. The loss incurred by
the failure of a counterparty is generally limited to the net interest payment
to be received by the Fund, and/or the termination value at the end of the
contract. Therefore the Fund considers the creditworthiness of each
counterparty to a swap contract in evaluating potential credit risk.
Additionally, risks may arise from unanticipated movements in interest rates or
in the value of the underlying securities.
The Fund records a net receivable or payable on a daily basis for the net
interest income or expense expected to be received or paid in the interest
period. Net interest received or paid on these contracts is recorded as
interest income (or as an offset to interest income). Fluctuations in the value
of swap contracts are recorded for financial statement purposes as unrealized
appreciation or depreciation on interest rate swap contracts.
At April 30, 1995, the Fund had outstanding interest rate swaps as follows:
Rate Type
---------------------------------
SWAP NOTIONAL TERMINATION PAYMENTS MADE PAYMENTS RECEIVED
COUNTERPARTY AMOUNT DATE BY THE FUND BY THE FUND
- ------------ -------------- ----------- ------------- -----------------
J.P. Morgan USD 41,000,000 1/22/97 Fixed-7.91% Floating-LIBOR
13
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
Net unrealized depreciation of outstanding swap contracts at April 30, 1995 was
$12,300.
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.
Transactions in call and put options written for the six months ended April 30,
1995 were as follows:
NUMBER OF
CONTRACTS PREMIUMS
--------- ----------
Options outstanding at beginning of year 1 $250,000
Options written 2 166,398
Options terminated in closing purchase transactions (1) (250,000)
Options expired (1) (127,779)
Options outstanding at 4/30/95 1 $38,619
At April 30, 1995, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $16,528,548 and gross unrealized
depreciation of investments was $59,298,233, resulting in net unrealized
depreciation of $42,769,685 (excluding foreign currency transactions). At
October 31, 1994, the Fund had a capital loss carryforward of $60,997,768 of
which $40,988,072 expires in the year 2001 and $20,009,696 in the year 2002.
NOTE E: ACQUISITION OF THE EQUITABLE SHORT-TERM WORLD INCOME FUND
On August 27, 1993, the Fund acquired all the net assets of The Equitable
Short-Term World Income Fund ('Short-Term World Income') pursuant to a plan of
reorganization approved by the short-Term World Income shareholders on August
20, 1993. The acquistion was accomplished by a tax-free exchange of 1,822,675
shares of the Fund for 1,972,376 shares of Short-Term World Income on August
27, 1993. The aggregate net assets of the Fund and Short-Term World Income
immediately before the acquistion were $2,901,765,166 and $16,900,781,
(including unrealized depreciation of $572,798), respectively. Immediately
after the acquisition, the combined net assets of the Fund amounted to
$2,918,665,947.
14
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
NOTE F: CAPITAL STOCK
There are 3,600,000,000 shares of $.01 par value capital stock authorized,
dividend into three classes, designated Class A, Class B and Class C shares.
Each Class consists of 1,200,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, 1995 OCTOBER 31, APRIL 30, 1995 OCTOBER 31,
(UNAUDITED) 1994 (UNAUDITED) 1994
------------- ------------- -------------- --------------
CLASS A
Shares sold 1,154,413 4,612,509 $9,313,450 $41,449,862
Shares issued in
reinvestment of
dividends and
distributions 1,635,377 3,737,652 13,028,619 33,610,283
Shares redeemed (20,308,567) (43,296,051) (158,529,429) (388,782,956)
Net decrease (17,518,777) (34,945,890) $(136,187,360) $(313,722,811)
CLASS B
Shares sold 1,173,129 2,833,662 $9,326,367 $25,465,262
Shares issued in
reinvestment of
dividends and
distributions 2,100,784 5,541,971 16,847,167 49,849,081
Shares redeemed (33,463,052) (81,594,355) (264,186,962) (731,549,755)
Net decrease (30,189,139) (73,218,722) $(238,013,428) $(656,235,412)
CLASS C
Shares sold 580,811 1,757,618 $4,898,149 $15,838,339
Shares issued in
reinvestment of
dividends 25,717 45,138 206,172 403,169
Shares redeemed (981,123) (1,467,516) (7,867,826) (13,059,868)
Net increase(decrease) (374,595) 335,240 $(2,763,505) $3,181,640
15
FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 1995 -------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89 $ 9.69
INCOME FROM INVESTMENT OPERATIONS
Net investment income .27 .93 .92 .91 .97 1.09
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.18) (.86) (.32) (.86) .06 .19
Net increase in net asset
value from operations (.91) .07 .60 .05 1.03 1.28
LESS: DISTRIBUTIONS
Dividends from net investment
income and other sources (.36) -0- (.60) (.72) (.97) (1.08)
Return of capital -0- (.61) -0- -0- -0- -0-
Distributions from net realized
gain on investments and foreign
currency transactions -0- -0- -0- (.02) (.01) -0-
Total dividends and distributions (.36) (.61) (.60) (.74) (.98) (1.08)
Net asset value, end of period $ 7.44 $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89
TOTAL RETURN
Total investment return based on net
asset value (b) (10.52)% .84% 6.67% .49% 10.91% 13.86%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $377,025 $593,677 $953,571 $1,596,903 $2,199,393 $1,346,035
Ratio of expenses to average net assets 1.29%(c) 1.13% 1.16% 1.10% 1.09% 1.18%
Ratio of net investment income to
average net assets 7.32%(c) 7.28% 8.26% 9.00% 9.64% 10.81%
Portfolio turnover rate 119% 109% 182% 133% 146% 152%
</TABLE>
See footnote summary on page 18.
16
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------------
SIX MONTHS FEBRUARY 5,
ENDED YEAR ENDED OCTOBER 31, 1990(A) TO
APRIL 30, 1995 ------------------------------------------------------ OCTOBER 31,
(UNAUDITED) 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89 $ 9.77
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25 .94 .87 .84 .89 .74
Net realized and unrealized gain
(loss) on investments and
foreign currency transactions (1.18) (.93) (.34) (.86) .07.12
Net increase (decrease) in net asset
value from operations (.93) .01 .53 (.02) .96 .86
LESS: DISTRIBUTIONS
Dividends from net investment
income and other sources (.33) -0- (.53) (.65) (.90) (.74)
Return of capital -0- (.55) -0- -0- -0- -0-
Distributions from net realized
gain (loss) on investments and
foreign currency transactions -0- -0- -0- (.02) (.01) -0-
Total dividends and distributions (.33) (.55) (.53) (.67) (.91) (.74)
Net asset value, end of period $ 7.45 $ 8.71 $ 9.25 $ 9.25 $ 9.94 $ 9.89
TOTAL RETURN
Total investment return based on
net asset value (b) (10.76)% .12% 5.91% (.24)% 10.11% 9.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $633,287 $1,003,633 $1,742,703 $2,966,071 $3,754,003 $1,950,330
Ratio of expenses to average net assets 2.00%(c) 1.85% 1.87% 1.81% 1.81% 1.86%(c)
Ratio of net investment income
to average net assets 6.62%(c) 6.58% 7.57% 8.28% 8.87% 9.90%(c)
Portfolio turnover rate 119% 109% 182% 133% 146% 152%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
----------------------------------
SIX MONTHS YEAR MAY 3,
ENDED ENDED 1993(A) TO
APR. 30,1995 OCT. 31, OCT. 31,
(UNAUDITED) 1994 1993
----------- ------- ----------
Net asset value, beginning of period $ 8.71 $ 9.25 $ 9.18
INCOME FROM INVESTMENT OPERATIONS
Net investment income .23 .58 .28
Net realized and unrealized gain (loss) on
investments and foreign currency transactions (1.16) (.57) .05
Net increase in net asset value from operations (.93) .01 .33
LESS: DISTRIBUTIONS
Dividends from net investment income
and other sources (.33) -0- (.26)
Return of capital -0- (.55) -0-
Distributions from net realized gain (loss) on
investments and foreign currency transactions -0- -0- -0-
Total dividends and distributions (.33) (.55) (.26)
Net asset value, end of period $ 7.45 $ 8.71 $ 9.25
TOTAL RETURN
Total investment return based on
net asset value (b) (10.76)% .12% 3.66%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,168 $8,136 $5,538
Ratio of expenses to average net assets 1.98%(c) 1.83% 1.82%(c)
Ratio of net investment income to
average net assets 6.59%(c) 6.50% 7.19%(c)
Portfolio turnover rate 119% 109% 182%
(a) Commencement of distribution.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and a
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Annualized.
18
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JAMES R. GREENE (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
EUGENE F. O'NEIL (1)
ROBERT C. WHITE (1)
OFFICERS
ROBERT M. SINCHE, SENIOR VICE PRESIDENT
F. JEANNE GOETZ, VICE PRESIDENT
DOUGLAS J. PEEBLES, VICE PRESIDENT
JOHN J. KELLEY, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
BROWN BROTHERS HARRIMAN AND CO.
40 Water Street
Boston, MA 02109
PRINCIPAL UNDERWRITERS
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07094-1520
Toll-free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee
19
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital
Mutual funds without the Mystery
THIS REPORT IS DISTRIBUTED SOLELY TO SHAREHOLDERS OF THE FUND
AND IS NOT TO BE USED AS SALES LITERATURE.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
STMSR
ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC.
SEMI-ANNUAL REPORT
APRIL 30, 1995
Alliance
Mutual funds without the Mystery
